END OF DAY REPORT

What happened today?

The ASX 200 closed down 70 points today. Down 93 at its worse.

  • Today was more like the ‘Red Wedding’ episode of ‘Game of Thrones’ as the optimism of yesterday gave way to a slight panic. The ASX 200 at one point looked like it would bring up the 100 points down as it flirted with 5500 on profit taking, Index Futures expiry and pessimism on Greece and lack of concrete plans from the FOMC last night. To put it in perspective we are down around 21 points since last Friday. Heavy volume but you expect that on expiry days.

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  • The pace of the falls picked up after lunch to be nearly 93 down before we rallied into the close to put some respectability into the day. Expect some raking over the ashes tomorrow to square up before another big weekend on the Greek debt front.
  • Another volatile day for Woolworths (WOW) -0.75%% as analysts raced to outdo themselves on downgrades. Ratings agencies Moody’s joined in the fun, changing the outlook to negative from stable. It appears easy to kick a man when he is down and with a big short position in the stock, the bears seem to be in charge. Seems it wasn’t so long ago that they were all rushing to recommend them to clients. The turnaround optimism has faded very quickly and lower prices seem possible. As Coles would say,” Down, Down, Prices are Down”. Not all good news though for Coles, as owner Wesfarmers (WES) -2.9% actually got whacked far more. Maybe Woolies is finding a few friends after all.
  • Financials copped the brunt of the selling as the warm glow from Buffet’s deal with IAG -0.87% turned to custard. The big four banks were down around 1.5% with only National Bank (NAB)-0.72% faring slightly better.
  • Resource stocks also fell away as Iron Ore continues to fall with producers BHP-0.71%,RIO -1.93% and Fortescue Metals (FMG)- 4.05%.One resource stock to buck the trend was Syrah Resources (SYR) + 10.22% today with good news on their graphite project exciting the market. It has been a while since graphite was in the news. In energy stocks both Caltex (CTX) + 3.36% and Santos (STO) +1.84% bucked the trend surprisingly as others followed the market
  • There were a few bright spots, only a few though, where Burson (BAP) +8.5% was a shining light in the gloom. They completed their institutional placement today with UBS upping the price target and size of the raising due to demand, the stock pushing higher on the news. In the end they managed to raise $218m and UBS now has them valued at around 340c Remember that Burson recently bought the Auto business off Metcash. In other industrials poor old Air New Zealand (AIZ) -% had a bad day as news that Jetstar is going to expand its offering to our cousins hurt sentiment
  • The Aussie dollar though seemed remarkably sanguine about the equity markets and even managed a small rise for the day to around 77.35c.
  • A sobering statistic from the RBA. Australian households and businesses handed over about $12 billion in bank fees in 2014, with credit cards the largest source of fees for consumers.
  • Tonight we get the European Union finance ministers meeting but don’t expect any kissing and making up with the Greeks and their lenders who are further apart than ever it seems. Words like “illegal, illegitimate and odious” from the parliament audit committee don’t seem tom be that helpful. Although the focus has been on this meeting they still have until the end of the month to come up with the money so all is not completely lost but default is looming. That is not to say that they will get kicked out of the club, although you would have to think they certainly will be looking harder at their membership application and the guys that proposed and seconded them.
  • Asian markets weakened as the day wore on as worries about the Greek tragedy continued, with falls in China, HK and Japan accelerating.
  • Average new home prices in China’s 70 major cities fell for the ninth consecutive month in May from a year earlier, down 5.7 per cent, but the prices fell in fewer cities indicating a return of some confidence. It was also good to see that some property developers are offering a free Porsche, if you buy one of their apartments. Seem to remember a similar thing happening in the UK in 1991.
  • And for a market that is poised to go up as Ramadan begins for millions of Muslims. Chillies!

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And finally a thought for the day. The global centre of gravity is shifting east, as the Chinese market roars. The scary thing is that our weighting will then decrease and global asset allocators will have to suck $140bn out of the ASX and allocate it elsewhere. The good news is that it is supposed to be replaced by the growing investment of Chinese in our market. Of course why would you buy our dull and boring market when you could invest in the Chinese ones for serious fast money?

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Clarence

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